Crude palm oil OTC swap use on the increase as prices rise

Greater liquidity on long-dated swaps than on exchange-traded options

Palm oil plantations

Trading and volume in over-the-counter crude palm oil (CPO) swap contracts are increasing, as supply pressures drive up prices and firms turn to the OTC market to hedge their long-dated exposures, say market participants.

On the supply side, dry weather in the first quarter of 2014 has put upward pressure on CPO prices. The average CPO price rose to $804 per tonne from $792 per tonne in the first two months of 2014, while CPO production and stock levels in Malaysia fell by 23% and 17%

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